Sifting through the many reasons that have been hypothesized to affect international
differences in financial reporting, Nobes developed a model with two
explanatory factors: culture and the nature of the financing system. 26 Nobes argues
that the major reason for international differences in financial reporting is different
purposes for that reporting. A country’s financing system is seen as the most relevant
factor in determining the purpose of financial reporting. Specifically, whether
or not a country has a strong equity financing system with large numbers of outside
shareholders will determine the nature of financial reporting in a country